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Friday, September 05, 2014

Law and Economics of Korean Street Food

Dear Korean,

I am living in the southern part of South Korea. One of the things I love about Korea is the street vendors selling food. Do these street vendors get a license or do they just set up shop? Also the 'shops' tend to close in the summer. For instance, I love 붕어빵, but they only sell during the winter. Why? Meanwhile in Seoul the street meat people are out all year long, usually at night. Why do they wait to set up at night? Why isn't street meat seasonal?

Debbie

Long before the American hipsters turned the food truck into a fad, Asians have figured out the romance associated with eating on a mobile platform.

But behind the delicious, delicious hunger-inducing facade, the legality and economics of street vendors in Korea are pretty complex. Conclusion first: technically, one must obtain a license--which comes with regular health inspections--to open up a street cart. But it is fair to say that the law is observed only in select parts of Korean cities. Street carts in areas with huge foot traffic, and those that sell alcohol tend to invite more scrutiny, because of the various potential public hazard (mass-scale food poisoning, drunken brawls) they pose. In areas with regulation, the street cart owners often form an association to conduct their businesses in an orderly manner. There is even a secondary market in which the license-holders buy and sell the government licenses.

Outside of those areas, however, anything goes. This is directly related to the character of street vending as a business. Street vending has very low entry barrier. At the lowest possible end, one only needs a floor mat and some home-made gimbab [김밥] to be a street vendor. Even a more sophisticated street food vendor rarely requires more than a truck carrying a makeshift kitchen which, in the grand scheme of business, is not a huge capital investment. In fact, there are many businesses that rent out the street-vending equipment, and provide the mass-produced, half-cooked food that the street vendors only have to heat up and serve. (Oh come on, don't act all surprised.) This serves to further lower the entry barrier into the street-vending business by lowering the cost, and by eliminating the need to learn whatever technical expertise necessary to cook up the food.

Because the entry barrier is low, street vending is an attractive option for numerous Koreans, many of whom are economically down-and-out. This makes the government reluctant to crack down on them very strongly. The local government will act if a street vendor creates any issue that causes complaints from the residents. But most vendors are wise enough to fly under the radar, and the locals are generally happy to pick up some 붕어빵--a fish-shaped pastry with sweet red bean filling--on the way home from work. (In fact, the people who file the most complaints against street vendors are other street vendors, who frequently use government regulation as another weapon in turf war.)

Why are some types of street food seasonal, and others available year-around? Much of it has to do with the fluctuating demand. The demand for chicken on a stick, for example, remains the same year-around. But certain types of street food--like 붕어빵, roasted chestnuts, roasted sweet potatoes--are strongly associated with autumn and winter. Because there is more demand for such food during a limited time frame, many street vendors jump into selling these cold-weather snacks to make a quick profit, and exit the business when the weather warms up.

A world with little to no regulation, in which entrepreneurs freely enter and exit to precisely meet the dynamic demand of the market? Maybe Korean street cart market is the dream of the laissez-faire capitalist.

Got a question or a comment for the Korean? Email away at askakorean@gmail.com.

10 comments:

Another reason I heard they don't sell Bungeoppang or similar cakes in summer is that the main ingredients, pre-made batter and red bean paste, go bad easily due to the hot weather. They can't keep the ingredients cool because there is no or not enough electricity in street carts.

Would it hurt that many people economically if they limited the number of street vendors by enforcing the law vigorously? Frankly, the unhindered number of street vendors are an eye sore, and it makes Korean cities look dirty and unappealing to foreign tourists. Just by cleaning up the ugly sites of street vendors, uncluttering the streets, and regulating the gaudy looking signs on the buildings - would do wonders to make Korean cities look cleaner and more appealing for the foreign visitors and bring more money to the economy.

Trust me--if there are complaints about Korea from foreigners (both tourists and ex-pats),"too many street vendors" ain't one of 'em.What you are more likely to hear is that the quality of street food in Korea pales in comparison to that of Thailand, Malaysia, and Vietnam.

An interesting article. I was just wondering, are you just an ordinary citizen of America who is into the Korean culture and thefore run this blog to write your day-to-day life? I'm just curious about whether you're a journalist in a media company who writes stuff about Korea.

"The Korean is a Korean American living in Washington D.C. / Northern Virginia. He lived in Seoul until he was 16, then moved to Los Angeles area. The Korean refers to himself in the third person because he thinks it sounds cool."

He is not in the media, he's a lawyer (though he has done radio gigs on request).

Yes it would hurt people economically as it's an important livelihood for many. And they largely go unregulated much to the ire of municipal governments who state that the 'shadow economy' of tax-dodging businesses - street vending being a large contribution to said shadow econony - amounts to anywhere between 17 and 24 percent of Korea's GDP. And when street vendors refuse to pay taxes, things can get ugly, as seen in an incident in Gangnam earlier this year (though I'm sure this was one extreme case that should not be generalized as the standard M.O. of tapping into the underground economy) :

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The Korean is a Korean American living in Washington D.C. / Northern Virginia. He lived in Seoul until he was 16, then moved to Los Angeles area. The Korean refers to himself in the third person because he thinks it sounds cool.